How we built a business out of recession - chapter 32 - cultural differences
The story of CitNOW*
This is the 32nd chapter about CitNOW, the company started from a kitchen table in Winnersh, Berkshire. If you’d like to read from the beginning, here’s a link to chpt 1. Each chapter is a 5-minute read. It’s an early draft of a book.
CitNOW was founded by Andrew Howells and Donna Barradale in 2005, although it was only registered in 2008. In February 2018, we sold the company to Tenzing, a UK private equity company, and it has been sold again since.
Berrie, Colin, and Michael said nothing at the Manchester Airport shareholder meeting, preferring to spectate and observe as the unexpected unfolded.
They were the core of our software development team, whose company we’d eventually bought in a debt-equity swap. Now shareholders, they had seats at an overly large meeting room table in some faceless airport hotel.
Maybe they were as surprised as I was that Alistair would even consider such a move, or perhaps it had already been discussed in one of those cosy offline chats that had started to happen when he was after something.
Donna and I had certainly never considered the possibility before. The focus had always been on growing the business, an all-consuming task with no room for playing games. The company could ill afford to get into a messy divorce with a major shareholder either - two if you included me - and I was never going to support such an idea.
The timing was highly questionable as well. As a founder, it had been a hard-fought campaign over five years, with us all pulling together to make the workshop and sales apps a resounding success, at least in the UK. We were finally generating some shareholder value, so it would have been nuts for any one of us to walk away just as it was beginning to multiply.
It was also ill-thought-through because the genie could never be put back in the bottle. Despite Donna’s initial rebuke and her less polite one the next day, battle lines had been drawn. With true intentions revealed to want more control at any expense, it wasn’t just a case of Quentin being sacked. There was now a breakdown in trust between at least three of the six shareholders. He never apologised, and we started treating him with the disdain he so thoroughly deserved.
I was reminded of the stories that occasionally appeared in the papers or were reported on TV about some successful pop band that announced its demise. Kept together by success, they played along for a while (literally), tolerating each other because of their increasing fame and fortune until even that wasn’t enough. Now rich and famous, one or more announced to the world their departure, preferring to walk rather than stay, finally ending any illusion of love, harmony and creative satisfaction. I now had a taste of why irrevocable differences occurred.
Alistair had been testing the water.
Sick of the sight of us? I don’t know, maybe. He must have been frustrated despite finally tasting some UK success. I think his move was mainly driven by the agenda changing in several ways.
Firstly, he felt more qualified and justified than ever to lead the company, the UK being proof of that.
There’d been a period when we’d all agreed, including Alistair, to look for a new CEO. We’d even found one, getting to know him after he’d done some consulting. He would have been perfect, had done it all before, but wasn’t prepared to accept the £60k basic salary with stock (we never got down to the detail), preferring eBay motors instead. They offered him at least double, plus all the usual performance enhancements.
One of the issues for a start-up without any financial investment beyond the bank’s overdraft is you can’t afford the talent which you really want when you need it. He’d already cashed in once and had money in the bank, so was in a position to take the job.
The outcome would have been different and, I believe, better for everyone because of a more balanced, inclusive style, plus he had the experience of having done it before. Ultimately, it comes down to risk. He made his choice, and who can blame him? We were far from being the finished article, and a lot could and did go wrong afterwards.
Secondly, the UK was now an established market for us and generated significant revenue. It, therefore, made sense to explore other ones, which is why Alistair and Chris presented their naive plans for Germany.
Very little research had been done beyond the usual desk-based stuff: the number of dealers, their individual size, which manufacturers etc. Our understanding around the table was that the UK was more advanced, and third-party software adoption was much slower, especially in the workshop. But it was also the home of BMW, so we must be able to replicate at least some of our UK success, especially with the bigger groups. Plus, we knew who they were and could gain access to them through our UK relationship.
We’d also just hired three Germans, two salespeople and a trainer, rented a German office, opened a German bank account and employed our new German administrator. It had to work.
We sold nothing, or next to nothing, for over 12 months. The trainer turned out to be a better salesperson than the salespeople. One salesperson worked for 6 weeks before going on long-term sick leave with a back injury that he argued we’d caused. It ended up in court. He left the company, and we paid him 12 months’ salary plus a bonus. By the end of that first year, they’d all gone apart from the office and our administrator, which was now servicing the needs of any European sales, wherever they happened to be.
I’m not trying to lump all of this failure entirely onto Alistair, either. After all, we agreed to do it. I don’t think the shareholders or the board had the necessary knowledge. No one had European market experience for a software start-up - we weren’t selling cars - and we certainly didn’t have the information needed to make an informed decision. Was this all making him feel more insecure than usual?
Forgive the cliché, but in the land of the blind, the one-eyed man is king. And our king had no intention of sharing, preferring to present fait accomplis. As I’d already found out, objecting to the lack of another plan was treated as a personal attack rather than an attempt to get it more right the first time.
Germany was, in fact, the last country we should ever have considered to launch in because dealers didn’t have much of a problem. Unlike the UK, where the public has a deep-seated aversion to car dealers - unfairly - not to be trusted, Germans don’t. If the dealer says you need a new tyre, then you pay for one to be fitted. A degree of trust already existed. It is also a more conservative culture than here, video was viewed with a lot more suspicion.
Even to this day, on the golf course, I occasionally hear comments about the exorbitant charges for a service from a franchised dealer and how they’re now going to seek out a cheaper, independent alternative next time.
Forecasts based on size and volume were only part of the story. Culture was not considered. It proved to be the first of several expensive lessons abroad.
*CitNOW was our company’s trade name before we sold it in 2018.